Government Contracts Monitor

Deemed Denials: Contracting Officers Also Must Comply Strictly with Contract Disputes Act Timeliness Requirements

March 7, 2016

As we have discussed, contractors must pay careful attention to, and comply strictly with, timeliness and related submission requirements, whether in the claims or bid protests context. This is not a one-way street, however. Government contracting officers also must comply strictly with such requirements. The equal application of these principles is reflected in two recent decisions involving the “deemed denial” doctrine. In the most recent case, the Armed Services Board of Contract Appeals (ASBCA) held that a contracting officer’s failure to set a precise final decision deadline did not comply with the CDA, entitling the contractor to immediately appeal to the Board on a deemed denial basis. In the second case, the Court of Federal Claims (COFC) held that the contracting officer gets only one bite at extending the final decision deadline, and that an attempted second extension was invalid and again entitled the contractor to appeal immediately on a deemed denial basis.

By way of background, and as you likely know, the CDA requires contracting officers to issue a final decision within 60 days of receipt of a properly certified claim over $100,000, or notify the contractor of the time within which the decision will be issued. 41 U.S.C. § 7103(f)(2); FAR 33.211(c)(2). In setting such further decision deadline, the contracting officer can consider the size and complexity of the claim, the adequacy of the contractor’s supporting data and other relevant factors. 41 U.S.C. § 7103(f)(3); FAR 33.211(d). If the contracting officer issues a proper final decision, such decision triggers the start of the contractor’s 90 days within which to appeal to the Board or one year to the COFC. However, if the contracting officer fails to issue a decision within the initial 60-day period, or any timely proper extension thereof, then the contractor can deem such failure as a denial and appeal immediately to the Board or Court. 41 U.S.C. § 7103(f)(5); FAR 33.211(g).

Aetna Government Health Plan, ASBCA No. 60207, decided Feb. 10, 2016, involved a $17 million certified claim arising out of an impasse in negotiations over Aetna’s termination settlement proposal in connection with the Government’s termination for convenience of a TRICARE contract. The contracting officer received the claim on July 20, 2015. On September 11, 2015 – within the initial 60-day period – the contracting officer notified Aetna that additional documentation was required to evaluate the claim, and that he anticipated issuing a decision “within 90 days of receipt” of such documentation. Aetna appealed to the Board ten days later, on September 21, 2015, contending it was appealing from a “deemed denial” of its claim. The government promptly moved to dismiss for lack of jurisdiction, asserting that “consideration of the requested materials was reasonably necessary and would require 90 days to perform.”

The Board summarily denied the government’s motion, stating that the CDA requires the contracting officer to “pinpoint” a specific future date by which the final decision will be issued. The Board stated that “[i]t is not enough to state that a final decision will be issued within a specified number of days of the occurrence of some future event.” Aetna therefore was free to construe the contracting officer’s improper attempted extension of the decision deadline as a “denned denial,” and immediately appeal. The Board also rejected the government’s alternate request to stay proceedings and remand to the contracting officer for a final decision, stating that the government provided no rationale for such request.

The COFC similarly held the government to strict compliance with the CDA’s decision timeframes in Rudolph and Sletten, Inc. [R&S] v. U.S., COFC No. 14-647, 120 Fed. Cl. 127 (2015). That case involved a $27M certified claim for delay and disruption and other costs. R&S submitted its claim on August 20, 2013. On the very last day (adjusted for the 60^th day being a weekend day), the contracting officer informed R&S that, due to the complexity and extensive nature of the claim, a final decision would be issued within nine months from the date of such letter. So far, so good. However, on July 8, 2014, the contracting officer informed R&S that the final decision would not be reached by July 15, 2015, as originally estimated, but instead would be issued on March 15, 2015 – another eight months down the road. R&S declined to wait further, and filed suit at the COFC on July 23, 2014 – eight days after the expiration of the initial nine-month extension. The government again moved to dismiss for lack of jurisdiction, arguing that R&S failed to obtain a final decision before filing suit.

The Court denied the government’s motion, stating that the CDA gives the government only one right to extend the final decision deadline and that the contracting officer needs to consider the claim complexity and other factors in setting such extended deadline. There is no right to further extend the deadline, and a contractor can treat any attempted further extension as a deemed denial. However, the Court, in the interest of judicial economy, did grant the government’s alternative stay and remand request, in view of the government’s representation that the contracting officer’s decision was by then imminent and had “great potential” to narrow the disputed issues. However, the Court put a tight leash on the government, and directed issuance of the final decision within 30 days of the Court’s Memorandum and Order.

The bottom line is that the government also must comply strictly with the CDA’s timeliness requirements. While this does not ease contractors’ compliance burdens, contractors may at least take some solace in the fact that the government similarly is held to account. Specifically, contractors can treat any contracting officer failure, within 60 days of receipt of a properly certified claim, to issue a decision, or extend the decision deadline to a precise, reasonable, future date and issue a decision within such extended period, as a deemed denial and proceed immediately to the Board or Court. The government does not have the right to condition any extended decision deadline on a contingency or further extend the decision deadline a second time.